Russia's Mounting Influence In Belarus And Kazakhstan

The common Customs Code stage of the customs union between Russia, Belarus and Kazakhstan came into effect July 6. This comes a day after a summit held in Astana at which the leaders of the three countries — Belarusian President Aleksandr Lukashenko, Russian President Dmitri Medvedev and Kazakh President Nursultan Nazarbayev — signed official documentation calling for the Customs Code to enter into force trilaterally, following a bilateral agreement signed between Russia and Kazakhstan on July 1. Lukashenko’s signing on to the code was particularly noteworthy, as he had been holding out over disagreements related to oil export duties between Belarus and Russia.

While Lukashenko continues to issue grievances over what he considers to be Russia’s bullying of Belarus, the Russia-dominated customs union continues to move forward. Moscow will progress inexorably toward its goal of creating a “common economic space” between Russia, Belarus and Kazakhstan by 2012, and Russia has proven that it is not willing to give in to Belarus’ attempts to extract concessions throughout the process.

The Customs Code — the second stage of the customs union that was launched by the three countries on Jan. 1 — sets rules for customs control and clearance and brings Russia, Belarus and Kazakhstan under a unified regulatory system. But many exemptions remain, preventing customs duties and regulations from applying to all products traded among the three countries. This stage also does not yet call for the complete elimination of customs duties among the three countries in trade with each other, and Russian Deputy Prime Minister Igor Shuvalov said, “Until a common economic space is formed, each party retains the right to levy export duties.”

This area has perturbed Lukashenko most noticeably. Lukashenko has argued that, because of the customs union relations Belarus has with Russia, it should not have to pay duties on Russian energy exports and should have a favorable price for natural gas. Moscow has not agreed to this. The dispute peaked on June 21, when Russia temporarily cut off natural gas exports to Belarus over debt disputes. Though Lukashenko was quite vocal in his opposition to this act, Belarus eventually paid off its debts to get the natural gas flowing again.

Despite Lukashenko’s many public outbursts toward Russia, Moscow maintains the upper hand in the countries’ relationship, as illustrated when Belarus officially signed on to the Customs Code. Moscow has proven that issuing grievances will get Minsk nowhere — except for getting its natural gas cut off. To emphasize this point, Russia and Kazakhstan signed the Customs Code without Belarus on July 1. In the end, Lukashenko capitulated.

Russia has made it no secret that the customs union is meant to align the systems of Belarus and Kazakhstan with Russia’s, with duties on more than 90 percent of the goods in the customs integration between the three countries planned to match the duties Russia already has. Moscow will continue to use the customs union as leverage to gain more strategic assets in Belarus and Kazakhstan. Ultimately, Russia is using the customs union to increase economic — and by extension, political — influence over the two former Soviet countries, and it will not hesitate to exert pressure to get the two countries in line as it moves forward in its integration efforts.

*This report is reprinted with permission of STRATFOR. It may not be reprinted by any other party without express permission of STRATFOR.